Home closing is a long and tedious process with many moving parts to account for and keep track of. As an escrow officer,  you have to make sure the closing process goes smoothly and all closing documents are collected on time.

Besides that, closing parties often have no idea about the closing costs that they would be paying. With all other things to stress about, seeing extra thousands of dollars in bills does not make them happy. Naturally, they expect escrow officers to know in advance about all of the closing fees, such as hidden HOA fees, and to walk them through the payment process. 

We invited Uyen Nguyen, the VP of Operations at Endpoint Title to share wisdom about the ways to keep your clients happy and paying.

Who pays for closing costs?

Closing costs may vary depending on the property sale’s price, whether there is a loan or any other payoffs and charges to third-party providers , as well as where the property is located.

Who pays for closing costs? It depends. The buyer and the seller can negotiate and “split the bill”. There is no rule here, besides the fact that the escrow officer always needs to follow what’s written in the contract and remain a neutral third party. Here is how Uyen goes about it:

“Remember, the buyer and seller are contracted to sell and buy this property, so who pays for what could be negotiated.

According to custom practice, there is a general principle: for any of those things that require inspections, the sellerusually pays for them. 

And the buyer pays for any other documents that are recorded, such as the lender’s documents, all of the loan costs, and anything that the lender requires for the buyer to get, such as an appraisal, an application fee, a credit reporting fee, etc.

As the escrow holder, we go by the contract, and the contract spells out who pays for inspections, who pays for surveys, who is paying the escrow fee, and who’s paying the title insurance premium.“

Explaining the HOA fees to the clients

This can get tricky. You need to make sure your client understands what they are paying and why. Here is how to talk about the HOA, or Homeowners’ Association, fees.

Outstanding HOA dues

The HOA fees cover recurring payments that HOAs charge to the homeowners to cover HOA’s day-to-day operating expenses, maintaining common areas, providing civic amenities, and some are set aside for HOA reserve funds. They may vary depending on each community association.

Why is it important?

This is how your client can be sure that the outstanding fees are paid and they won’t be surprised by a sudden five-figure payment they would need to make. Explain that you also check if there are any other HOAs, such as Master HOAs associated with the property, so that your client knows exactly what they would be dealing with.

“What we’re [escrow] looking for is making sure that the HOA monthly dues or quarterly dues, and everything else, are paid current. We are searching for the fees that are owed by the seller to apportion the fees to them. And then everything else going forward will be the buyer’s responsibility.“

HOA Assessments

The HOA assessment fee is a one-time fee to cover unexpected costs, such as natural disasters.

Why is it important?

Show your client if there have been any special assessments for future work or past work. This is how the client understands what the HOA has covered in case of an emergency, and knows how to act.

HOA Transfer fees 

HOAs will often charge fees for transferring documents when they have to change their records from seller to the buyer, such as move-in, and move-out fees. If the contract doesn’t call it out, then escrow has to check who is paying for it. Typically, the seller will pay the move-out fee because they have to transfer it. And if there’s a move-in fee, then the buyer pays it. But again, it could be negotiated

Why is it important?

The transfer of the documents ensures that the buyer is the owner of the property now and will be the one receiving the HOA communications. For the seller it ensures they are no longer responsible for dealing with the HOAs on the property.

Administrative fees & HOA document fees

As part of the HOA transfer fees, HOAs also charge to prepare and distribute all of the requested documents, provide the Resale Package and CC&Rs, and transfer the documents. 

Why is it important?

The amount of the fees is non-negotiable and mandated by the HOA, and they are almost always being paid at closing. It is crucial these fees are paid so that all the closing documents arrive on time.

HOA service fees and HOA rush fees

Service fees include any other fees that an individual HOA might decide that they need to charge for providing that service to transfer their records from the old owner to the new owner.

HOAs can take their time and it’s often unexpected for the parties to find out how long it takes to get the HOA documents. Depending on the state, the deadline for an HOA to provide the documents is different. And if the HOAs can’t process it in time to accommodate the closing date, then it will require the parties to pay a fee for the rush service, which can get up to several hundred dollars. 

Why is it important?

After all the escrow payments, the number of fees from the HOAs may come as a surprise for the buyer and seller. Usually the parties know in advance about all the HOA fees because the monthly cost is a part of the real estate disclosure package. Make sure to explain that these fees need to be paid in order for the HOA to process the request on time.

“A lot of clients will ask us, ” Will HOAs waive it?”. And we tell them,the only thing we can do is ask. And you [seller] could also ask because, usually, it’s a seller’s cost. As the neutral third party, we’re not in a position to negotiate.

And if you don’t pay the fee, HOAs won’t process your request. If they don’t process the request, the buyer and seller won’t get the documents in time for their close. It’s the fee, and you’re gonna pay it or not pay it.“

Typically, customers will be unhappy about the number of fees because closing a home is a very stressful process, and, when the fees start piling up, people start looking at all of the line items because it’s becoming more and more costly.

To alleviate the stress related to the HOA fees at closing, an escrow holder should make sure all of the HOA documents come on time before the closing date, establish a transparent HOA process, uncover all of the HOA fees as early as possible, and inform the clients in advance of the potential and hidden HOA costs.

Escrow tips for making your clients happy

Do things early

You already know – you have to be on time. And you also need to be prepared for questions and money conversations. If you proactively provide information about the closing process before the first meeting, you can save both you and your client valuable time. 

Prepare in advance the answers to the common questions you’ve encountered before, have a closing documents checklist for your clients, share the timeline for the process, etc. 

Doing this will not only make the process smoother but also add a layer of trust and transparency to the client relationship.

“The sooner that you get the information to the client, the more time you will have to resolve any questions or issues. If we get the HOA documents earlier, and the seller has a question about some of the fees, that will allow them more time to go to the HOA to question those fees. That’s why our goal is to do everything as early as we can to avoid stress at the last minute.“

Combine neutrality and personal guidance

Escrow officers are often in between two worlds. On one side, you are a neutral party. On the other hand, you strive to provide excellent service and customized solutions to meet the needs of each client. 

Find that perfect balance between staying neutral and providing personalized customer service. Here is Uyen’s experience:

“Our duty, as a title and escrow holder, is to be the neutral third party and to follow instructions of our principles. But, during the escrow process, we do a fair amount of guiding the customer through the process, in terms of what’s going to be happening, what this fee is, and where it came from.  If they have questions about the steps in the process from the beginning to the closing, we inform and guide them through that, so that they know what’s happening next.“

Communication is key, especially in a profession that is personal. Don’t be afraid to be helpful and explain things in detail to your clients.

Make the closing costs payments easier

The title industry is becoming more and more digitized, and easy and secure payments become more common during real estate transactions. Using technology and an all-in-one digital and encrypted platform makes the lives of your clients so much easier. It is one thing less to worry about.

It is also your competitive advantage since the industry is still adopting this approach.

Having a single platform for you to track all payments and documents allows you to deliver that extra value to clients. Make sure you leverage the tech to your advantage and use a platform that allows you to have all your HOA documents in one place, schedule your HOA orders in advance, summarize the key HOA closing details, uncover any hidden HOA fees, front the HOA fees to the seller, and give you invoice flexibility.

Like us, for example. We become an extension of your team so you can focus on providing that excellent customer service. Our platform takes care of everything for you and it is also custom-made to fit your processes. And we let you try it out for free.

Talk with our team to simplify your HOA document workflow.